Cash windfall for discoms as defaulters rush to clear dues

November 17, 2016 — INDOLINK Consulting (es)

Source: Business Standard, Nov 17, 2016

The central government’s demonetisation drive seems to have led to a windfall for power distribution companies (discoms) across the country. The discoms are witnessing defaulters coming forward to clear arrears and in many cases, consumers also depositing advance payment.

The government has allowed consumers to deposit old currency notes in state electricity boards (SEBs) to pay bills. For private discoms, there is a daily limit of Rs 4,000 per consumer to be paid by cash. SEBs, reeling under debt and high percentage of commercial losses, have welcomed the sudden surge in cash.

For instance, at Paschimanchal Vidyut Vitaran Nigam, one of the five state-owned discoms in Uttar Pradesh, the collection was Rs 500 crore in the past four days alone – a tenfold increase over normal days.

A senior official with the UP Power Corporation said collection is Rs 20 crore higher than usual, but there’s no distinction as arrear or bill payment. “People are paying in absolute amount to get rid of old currency. We’ll know in a month’s time how much of it is bill payment and how much is to clear dues. We would then calculate the realisation against bad debt.”

The three discoms in Rajasthan collected close to Rs 480 crore in four days after the announcement of demonetisation. The collection in a month usually is around Rs 2,000 crore.

Rajasthan’s discoms are saddled with losses to the tune of Rs 80,000 crore -– the highest in the country. It is followed by UP with Rs 50,000 crore. Rajasthan state government officials said the sudden cash influx would not make any difference to their coffers, but they might be able to pay back some portion of their working capital loans.

Rajasthan has the highest technical and commercial loss among all states at 27 per cent followed by UP with similar loss figure. One of the major reasons for commercial losses is default in bill payment and energy theft.

Some are hopeful that compliance to paying electricity bills might improve. “We would try and collate data of the defaulters once the initial euphoria is over. There are many who have paid arrears of months together. They will be marked,” said a senior UP state government official.

In Delhi, which has two privately owned discoms, the footfall increased multifold. For Reliance Infra’s BSES, the footfall at their billing kiosk increased three times. At Tata Power Delhi Distribution, the footfall doubled in four days.

The SEBs, though, fear this could be shortlived, as there is a likelihood of liquidity crunch in the coming months. The SEBs across UP, Rajasthan, Delhi and Haryana expressed the sentiment that this is a shortlived affair.

“The same consumer who is clearing arrears now would go back to defaulting on payments again. This gives us a chance to start a ‘name and shame’ campaign for defaulters, but that will take some months,” said a senior power sector executive in UP.